Millionaire Next Door

I recently read this research work made on America’s millionaires. I was intrigued by the fact that this book is a runaway bestseller that sold out its first printing in three days, held a spot on The New York Times' best-seller list for more than three years and is hailed as a staple for any personal finance book collection.

The book by Thomas J. Stanley and William D. Danko, subtitled "The Surprising Secrets of America's Wealthy," was published Oct. 25, 1996. But the striking and profound findings revealed in that book a decade ago are as true today as they were then--especially when it comes to spending money.

The book showed that millionaires spend their money smarter than other people. They still do. ”Most important, the book showed that people with average, steady jobs can become millionaires over their lifetimes--that most millionaires are made, not born. Indeed, 80 percent of millionaires are first-generation rich, the authors found. They are modest. In fact, they might live next door.”

Financial health is about earning and spending. Although earning a lot of money is correlated with wealth, it's not a perfect correlation. Not everybody can play great offense. In other words, not everybody can make P1 million a year or even P100,000. "Given that, you have to look at defense. To play great defense, you have to know where all the money is going. And most people don't. You need to account for every centavo you've got and write it all down. You'd be shocked at how much money people waste. If you're looking at being happier by having more things, get a life."

This reminds me of a “perception” game played by participants of a “Corporate Image” seminar. They were asked to describe typical Cebuano and Manileno executives:
Manileno Executive --- a well dressed, gregarious, suave, flashy, charming public relations manager with a winning smile and a string of girlfriends. He always has time for his officemates and often invites them to a couple of drinks at a high-end bar. He likes to impress his clients by taking them out to dinner in a swanky restaurant. His family hardly sees him. He drives the latest car model and wears an expensive watch. Even if he earns a six- digit salary, he often complains that his pay is never enough. Cebuano Executive --- an unassuming and staid accounting supervisor with thick glasses and a bulky adding machine, sitting in a cramped room behind a stack of papers. Anyone who meets him says his personality blends well with the drab furniture. He is tightfisted with his money and doesn’t like "night-outs" with officemates. He prefers the company of his family. If he is unable to go home for lunch, he grabs food from his brown paper bag which is neatly tucked in his lower drawer. Even if he also works as bookkeeper of a few small companies, he prefers to commute by jeepney.

Between the two, who do you think they thought is wealthy?

On a scale of happiness, these "wealth accumulators" who are frugal with their money are quite happy, book author Stanley notes. "In fact, the more wealth you have, the higher your satisfaction." But their happiness comes not from material things but from achievement and being financially independent. It comes from satisfaction with their family and job. "There is absolutely no correlation between happiness and the brand of car you drive. It has nothing to do with it. What happens is before you buy the Porsche, you'll think it will make you happy, but it doesn't work that way. The guys wearing a Seiko or Rolex or drive a Toyota or BMW have no difference in happiness."

Stanley's research shows high-priced cars seem to be wealth-repellant. "What's interesting about spending is that everybody thinks all the millionaires in America have BMWs. Even among the highest income levels, about 60 or 70 percent have never owned a BMW," he said in an interview with the Chicago Tribune. "I think BMW is a great car. I'm a car guy. But I won't buy one because there is a relationship between wealth and how much people spend for cars. There's no doubt about it. It's a significant relationship."

Stanley, who grew up poor in New York City, said the biggest thrill he ever had came a decade ago when "The Millionaire Next Door" approached No. 1 on The New York Times' best-seller list. To celebrate, he went out and bought a Toyota 4Runner. Where is that vehicle now, 10 years later, when he's a wealthy man? In his garage. "It has 140,000 miles on it," he said. "I'll never own a BMW or Mercedes or Rolex because ... I know how many people who are not wealthy but have the glitz. It says nothing about your inspiration, your wealth or anything else."

If you're interested in the book, I'm selling my copy for P339.00